July 27, 2015

Ms. Gina McCarthy

Administrator
Environmental Protection Agency
1200 Pennsylvania Avenue, NW
Washington, D.C. 20460

Re: Renewable Fuel Standard Program: Standards for 2014, 2015, and
2016 and Biomass-Based Diesel Volume for 2017
[Docket No. EPAHQOAR20150111; FRL992728OAR]

Dear Administrator McCarthy:

The National Association of Truck Stop Operators (NATSO), representing

Americas travel plaza and truck stop industry, appreciates the opportunity to
submit the following comments in response to the Environmental Protection
Agencys (EPAs or the Agencys) proposed rule on the Renewable Fuel Standard
(RFS or the Program) renewable volume obligations (RVOs) for 2014, 2015,
and 2016 and biomass-based diesel RVOs for 2017 (Proposed Rule or the
Proposal).1 NATSOs members generally support the Proposal because it
appropriately recognizes that the RFS has the potential to cause problems in the
retail fuels market if left unchanged. The Proposal appropriately seeks to address
these potential problems without undermining the principles on which the Program
is premised: diversifying fuel supply, increasing the overall fuel supply, encouraging
domestic fuel production, and lowering fuel costs for American consumers.

I. Summary.

NATSO is the premier trade association representing travel plaza and truck
stop owners and operators. Highway travel plazas and truck stops sell 90
percent of all diesel fuel sold at retail in the United States. Thus, in light of
the integral role that biodiesel plays in satisfying the RFSs objectives, the
success of the RFS will hinge on NATSOs members ability to sell biodiesel on
a cost-effective basis.
NATSO supports EPAs exercise of its statutory waiver authority to avoid the
blend wall and tie RVOs to market realities.
EPA faces a delicate balance with respect to biodiesel: On the one hand,
increasing mandates under the RFS can enable NATSO members to sell the
product to consumers and lower prices and thereby increase consumer
demand for biodiesel; at the same time, if RVOs are set too high, it could lead
to increased prices for diesel fuel, which would have an adverse effect on
NATSO members and the U.S. economy as a whole.

1 80 Fed. Reg. 33100 (June 10, 2015).

 As it proceeds with this rulemaking, EPA must be cognizant of the variety of
policy and economic factors that influence the price and thus market
demand for biodiesel. Any policy changes that would lead to an increase in
the price of biodiesel in the United States would lower consumer demand for
biodiesel and restrict the Agencys ability to set ambitious RVOs.
EPA should not revise the definition of obligated party under the RFS.
Refiners and importers are obligated parties because that is the only way to
ensure that renewable fuels are integrated into the nations fuel supply. If
blenders rather than refiners and importers were obligated parties, the RFSs
objectives would not be achieved.

II. NATSO, Inc.

NATSO is a national trade association representing travel plaza and truck stop
owners and operators. NATSOs mission is to advance the success of truck stop and
travel plaza members.

Since 1960, NATSO has dedicated itself to this mission and the needs of truck stops,
travel plazas, and their suppliers by serving as Americas official source of
information on the diverse industry. NATSO also acts as the voice of the industry on
Capitol Hill and before regulatory agencies.

NATSO currently represents approximately 1,381 travel plazas and truck stops
nationwide, comprised of 1,071 chain locations and 310 independent locations,
owned by nearly 201 corporate entities. Approximately 80 percent of NATSO
members facilities are located within one-quarter mile of the Interstate Highway
System, serving interstate travelers exiting the highway and serving as the home
away from home for the nations professional truck drivers.

Highway travel plazas and truck stops sell 90 percent of all diesel fuel sold at retail
in the United States. NATSO members prefer long markets with a variety of supply
options to offer their customers. As with any successful retailer, NATSO members
simply want to sell products that their customers want to buy. In their effort to
provide the most competitively priced fuel to their customers, many NATSO
members buy and blend biodiesel into the diesel fuel sold at their locations. While
the entire industry is not involved in blending biodiesel, many NATSO members buy
and blend biodiesel into diesel fuel when the blending economics allow them to do
so. As the biodiesel industry matures, more and more truck stop operators are
considering expanding into biodiesel blending.

The success of the Renewable Fuel Standard will hinge on NATSOs members ability
to acquire, blend, and sell biodiesel on a cost-effective basis relative to traditional
diesel fuel. Given the central importance of trucking and diesel fuel in our nations
supply chain for goods, low-cost biodiesel not only makes fuel cheaper for fleets and
truck drivers, but it subsequently makes all goods more affordable.

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The comments that follow are designed to assist the Agency in developing a
regulatory environment that facilitates these objectives.

III. NATSO Supports EPAs Exercise of its Waiver Authority

NATSO believes that EPAs Proposal wisely takes advantage of the Agencys
statutory authority to avoid the blend wall. The blend wall represents the point at
which there is an insufficient supply of renewable fuel that can be delivered to
consumers. If the RFSs volume obligations exceed the volume of renewable fuels
that the market can absorb, the market will hit the blend wall. This would lead to a
significant increase in the price of fuel, caused by a shortage of Renewable
Identification Numbers (RINs), which are used to ensure compliance with the
RFSs volume obligations. If the market reaches the blend wall, there will not be
enough RINs to allow obligated parties to satisfy their volume obligations under the
RFS. This will result in significantly elevated prices for RINs that are available. Some
obligated parties could fail to acquire sufficient RINs and face fines from EPA. Others
would take steps to reduce their obligations under the Program (such as reducing or
exporting production).

All of these situations will add costs to fuel production and, as happens in every
industry, these costs will be passed down to retailers and ultimately will be
absorbed by consumers.

IV. The Economics of Biodiesel

While NATSO members sell gasoline and gasoline blended with ethanol to their
customers, their primary interest in the RFS pertains to biodiesel.

EPA faces a delicate balancing act with respect to biodiesel: On the one hand steady,
increasing biomass-based diesel and advanced biofuel mandates under the RFS
create the demand for RINs; this can serve to lower the costs of acquiring and
blending biodiesel, enabling NATSO members to sell the product to consumers at
lower prices and thereby increasing consumer demand for biodiesel. At the same
time, if these RVOs are set too high, it will increase obligated parties operating costs
so as to impose upward pressure on the cost of diesel fuel obligated parties will
want to recover their costs of acquiring and retiring the necessary RINs, and/or will
be incentivized to export diesel fuel (and thus avoid incremental RVO increases) and
the diminished domestic supply will lead to higher diesel prices.

In light of the Agencys wise decision to tie RVOs to market realities, achieving this
balance requires EPA to consider the fluid variety of economic factors influencing
biodiesel prices in the United States.

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Historically, biodiesel fuel has been more expensive to produce than its petroleum-
derived counterpart. However, a number of federal policies including the RFS
have encouraged biodiesel blending and sales.

Under the RFS, for example, NATSO members can acquire biodiesel with Renewable
Identification Numbers (RINs) attached, blend the product with diesel fuel, and
separate the RINs from the biodiesel. The RIN then becomes a commodity that our
members can sell to obligated parties. This transaction can make biodiesel less
expensive than diesel fuel for NATSO members. A RIN, in effect, closes the price gap
between what a refiner or blender would be willing to pay for the energy value of a
gallon of biodiesel and the price for which the producer is able to sell it and still earn
a profit.

Additionally, Congress has passed a biodiesel blenders tax credit that has further
enabled biodiesel blenders including NATSO members to earn a profit by selling
biodiesel. Although this credit has a turbulent history of expiring and then being
reinstated (sometimes retroactively), the blenders credit undoubtedly makes
buying, blending, and selling biodiesel more cost advantageous. This increases
consumer demand and thus fosters a market environment that enables EPA to
require heightened RVOs and come closer to satisfying the RFSs objectives.

EPAs recent decision to allow streamlined Argentinian biodiesel imports to qualify

under the RFS2 is another example of public policy that serves to increase the supply
of biodiesel that can be acquired and sold at a lower cost than diesel fuel. Such
imports will increase the supply of biodiesel in the United States, which in turn
imposes downward pressure on prices.

At the same time, federal policies can also impose an upward pressure on biodiesel
prices. The biodiesel blenders credit for example expired at the end of 2014.
Although it may be extended retroactively later this year, the uncertainty
surrounding the credit diminishes its positive impact on prices.

Similarly, the Senate Finance Committee recently proposed eliminating the biodiesel
blenders tax credit and replacing it with a biodiesel producers credit. If this change
were to become law, the credit would only apply to biodiesel produced in the United
States, negating the downward pressure that foreign supply imposes on domestic
prices, while giving domestic producers greater leverage to increase prices (because
they would have an artificial advantage over imported product).3 Additionally, this

2 See Environmental Protection Agency, Letter from Byron Bunker, Director, Compliance Division,
Office of Transportation and Air Qualify. Jan. 27, 2015, available at
http://www.epa.gov/otaq/fuels/renewablefuels/documents/carbio-decision-document-2015-01-
27.pdf.
3 Areas of the U.S. that have been primarily served by product from offshore sources will be

especially hard-hit by this development, and would likely see a marked increase in diesel
consumption (and an associated diminution of any air-quality benefits associated with biodiesel
consumption).

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change would incentivize domestic producers to export product, thereby
diminishing U.S. supply and increasing the price of biodiesel in the United States.
This would lower consumer demand for biodiesel, and restrict EPAs ability to set
ambitious RVOs.

V. Definition of Obligation Party

It has come to NATSOs attention that certain stakeholders are advocating that EPA
revise the RFS regulations in a manner that would make blenders obligated parties
rather than refiners and importers. EPA should reject this effort. NATSO has joined
with other trade associations representing motor fuel retailers to file a
supplemental comment letter detailing the flaws with this approach. That comment
letter has been submitted to the docket for this rulemaking. The discussion below is
intended to supplement that letter.

The RFS is designed to displace traditional petroleum fuels derived from foreign
sources with domestically produced renewable substitutes. These objectives can be
achieved only if renewable fuels are, in fact, integrated into the nations fuel supply.
Renewable fuels can only be integrated into the nations fuel supply if the petroleum
supply can be blended with renewable fuels to produce a product that can be sold
lawfully.

The only entities that can control the characteristics of the nations petroleum
supply (and thus whether it can be blended with renewable fuels to produce a
product that can be sold lawfully) are those that import it or manufacture it. Other
entities, such as downstream blenders, do not control such characteristics and can
only obtain product that importers and manufacturers sell to them. Absent their
status as obligated parties, there is no incentive for manufacturers or importers to
introduce into commerce petroleum supply that can be blended with renewable
fuels to produce a product that can be sold lawfully. They are under no legal
obligation to do so. That is why it is logical to make these entities obligated parties
under the RFS.

Whats more, many fuel retailers that blend today would cease doing so if such
activities rendered them obligated parties under the RFS. There is no legal
requirement that they continue their blending operations. Indeed, many
downstream blenders would be unable to obtain product that is suitable for
blending with renewable fuels. That is why it is illogical to make blenders
obligated parties under the RFS.

As a practical matter, making blenders obligated parties rather than refiners and
importers would render the RFS optional: Importers and manufacturers would
have no obligation (or incentive) to generate petroleum supply that can be blended
with renewable fuel to produce a product that can be sold lawfully; and blenders
would be under no obligation to continue their blending operations (many would be
incapable of doing so).

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The RFS is not designed to be an optional program, but rather a mandatory program
to increase the presence of renewable fuels in the nations fuel supply. Refiners and
importers are obligated parties because that is the only way to ensure that
renewable fuels are integrated into the nations fuel supply. If blenders rather
than refiners and importers were obligated parties, renewable fuels presence in the
nations fuel supply would diminish substantially, and the RFSs objectives would
not be achieved.

VI. Conclusion

NATSO is grateful for the opportunity to provide these comments and stands ready
to be of assistance to the Agency in its consideration of this matter.

________________________________________________

David H. Fialkov
Legislative and Regulatory Counsel
NATSO